Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
Oil prices are sharply lower Friday morning as markets prepare for 'Doha disappointment'. The OPEC meeting scheduled for Sunday is not expected to result in meaningful production curbs, and even if they do the probability of member countries adhering to cuts or a freeze is an open question.
As an aside, I have no interest in putting my own money to work in the energy sector at present. It's not because of any conviction as to the short term direction of the commodity price – I could easily build a solid bull or bear case – but there's so much ultra-fast hedge fund trading in oil that it's too easy for both optimists and pessimists to get their figurative heads kicked in on a week to week basis.
"Oil Falls Before Doha as Global Markets Brace for Weekend Risk" – Bloomberg
"Oil Freeze: Everything You Need to Know About the Doha Summit" – Bloomberg
"Goodrich Petroleum Files for Chapter 11 for Restructuring" – Bloomberg
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Chinese economic data released early Friday suggested stability, but most economists agree that it's for the wrong reasons. The country's credit and debt binge has returned which, like making monthly Visa payments with an American Express card or drinking away a hangover, merely postpones a larger reckoning.
"Chinese banks extended 1.37 trillion yuan ($211.23-billion) in net new yuan loans in March, nearly double the previous month's lending of 726.6 billion yuan, suggesting renewed appetite for investment among wary Chinese corporates … 'Today's released data ought not to distract from the fact that the structural issues facing China's economy remain unresolved,' wrote Economist Intelligence Unit economist Tom Rafferty in a research note.
"'It has taken considerable monetary and fiscal policy loosening to stabilise economic growth at this level and this effort has distracted from the reform agenda that is fundamental to long-term economic sustainability.'"
"Chinese economy shows signs of debt-fueled recovery" – Reuters
"China Defaults Prompt Issuers to Pull $5.4 Billion of Bond Sales" – Bloomberg
"China's New Credit Growth Far Exceeds Expectations: Chart" – Bloomberg
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Left-leaning University of California Berkeley economist Brad DeLong wrote a fascinating post framing global monetary and fiscal policy as driven primarily by the interests of plutocrats. I don't fully buy it – it seems overly simplistic to think Ben Bernanke was only thinking about billionaires during the financial crisis – but I found it an interesting way of looking at things, not least because Bernie Sanders supporters likely agree completely,
"The collapse in asset prices impoverished the plutocracy. The collapse in spending and the rise in unemployment impoverished the working class. Central banks responded by reducing interest rates. That restored asset prices, so making the plutocracy whole. But while that helped, that did not do enough to restore the working class.
Then the plutocracy had a complaint: although their asset values and their wealth had been restored, the return on their assets and so their incomes had not be. And so they called for austerity: cut government spending so that governments can then cut our taxes and so restore our incomes as well as our wealth. But, of course, cutting government spending further impoverished the working class, and put still more downward pressure on the Wicksellian neutral interest rate r* consistent with full employment and potential output.
And here we sit."
"We Are so Screwed. Econ 1-Level Edition" - bradford-delong.com
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Canadian banks have been immune from the 'incredible shrinking banking sector' theme that is now being felt by powerhouse Goldman Sachs,
"Ultimately, [Goldman's] latest push to reduce expenses probably will amount to the biggest since 2011, or possibly even earlier, the people said. In July of that year, the bank announced an initiative to trim more than $1 billion in costs including compensation, a plan that entailed cutting 1,000 jobs. By year-end, expenses had dropped 14 percent from the previous year.
"JPMorgan Chase & Co. and Bank of America Corp., which reported first-quarter results this week, countered their own revenue declines with cost cuts that went deeper than analysts expected. "There's a lot more to do," Bank of America CEO Brian Moynihan told analysts Thursday of his focus on expenses."
"Goldman's Blankfein Demands Deepest Cost Cuts in Years" – Bloomberg
"No end in sight for energy pain at Wells Fargo, Bank of America" – Reuters
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Tweet of the day: I loved this. A late goal for Liverpool's soccer team apparently had the power to temporarily heal the disabled. "@Oddschecker It's a miracle. Take a look at the Liverpool fans in the wheelchair viewing area behind the goal.. pic.twitter.com/KBl0skJ477 " – Twitter
Diversion: "eating fruits and vegetables is correlated with happiness. So is local temperature and wind speed" – U.S. National Library of Medicine